Kiel Institute: Real estate price increases are slowing down

Too few new buildings and increased material costs have recently caused real estate prices to rise significantly - including for property. The trend for condominiums is now at least weakening, reports the Kiel Institute for the World Economy.

According to an analysis by the Kiel Institute for the World Economy, the price increase for condominiums and single-family homes has continued to moderate. Purchase prices for apartments rose by 0.3 percent in the second quarter compared to the previous quarter, as the institute announced. Prices for single-family homes increased by 1.8 percent. Data from the Federal Statistical Office is not yet available for the second quarter.

Of the eight most populous cities, the purchase prices of condominiums rose the most in Düsseldorf at 1.2 percent. In Stuttgart, where the ailing automobile industry is an important employer, prices fell the most at 1.6 percent. However, the research institute did not yet have figures for Berlin, Hamburg and Munich.

“In nominal terms, prices continue to rise, but the upward trend has visibly lost momentum,” said the head of the Greix project, Jonas Zdrzalek. After taking inflation into account, condominium prices actually fell by 0.9 percent compared to the previous quarter. This means that sellers achieve higher prices, but can afford less of them.

The scientists at the Kiel Institute usually evaluate transaction data from expert committees every quarter and create the Greix index. This contains data from more than 20 larger cities and three districts.

The German Economic Institute (IW) in Cologne argued at the end of April that the Iran war was dampening real estate prices. The IW referred to the increased interest rates as a result of the war. This reduces the affordability of real estate. This dampens demand and limits scope for price increases.